PENN CENTRAL. POST NEWS FOR AMERICA'S LEADING RAILROAD FAMILY JULY ~ AUGUST 1971 THE ROAD AHEAD Trustees pursue survival program for Perm Central Page One Railroaders ask Congress to act on ASTRO plans Page Four The Trustees appeal to Labor for changes in crew rules essential for PCs SURVIVAL PROGRAM year ago, overwhelmed by financial disaster, Penn Central 1. To end the losses from passenger service. Transportation Company took the extreme step. 2. To discontinue money-losing branch lines. It applied to the Federal Court on June 21, 1970, for reorgani• 3. To improve the pricing of freight services. zation under the Bankruptcy Act. 4. To modernize work rules and reduce the operating On July 22, 1970, the Court appointed four Trustees. costs. Their assignment: Progress is being made on the first three points, the Trustees To do whatever possible to raise the Company out of bank• told the press conference. ruptcy and restore it as a going enterprise. In regard to passenger service, they said: "Amtrak is presently Now, a year later, the Trustees can report progress. But not in effect and we are hopeful that a fully compensatory contract enough. The financial condition is still perilous. can be settled upon in due course. In a conference with a large gathering of newsmen last month, "With respect to line abandonments and rate regulation, we are the Trustees summarized the situation as follows: also hopeful that Penn Central's needs can be met as a result "Penn Central is making progress in its struggle to survive. of proposals to be advanced by the Administration and the indus• "Service to the public is infinitely better. try. In the meantime, we have every reason to believe that the "Expenses are under firmer control. ICC will respond with promptness to our various requests, out of "The outlook for Penn Central is brighter than it was when awareness of Penn Central's critical financial condition." the Congress acted on the $100 million guaranteed loan. The outcome of the survival program now "depends in "The chances for ultimate recovery appear to be better. principal measure on what happens in one vital area—labor "In the short run, however, the prospect (which may change) relations," the Trustees said. is that Penn Central will have to shut down for lack of funds by "The enterprise cannot carry the labor costs it does now." November or December of this year, or possibly earlier, if a The Trustees said they will seek to reduce the makeup of crews number of contingencies were to develop adversely." in road and yard service to the size necessary for efficient and eco• The financial problem is massive. nomical operation. The basic crew would be three men, but the In 1970, Penn Central Transportation Company had a net loss of number might be varied by management depending on the circum• $425,739,148. stances. For 1971, the Trustees had estimated a loss of $188 million. The Trustees said they intend to achieve the urgently needed But freight traffic this year has not reached hoped-for levels. As changes through collective bargaining, and appealed for the a result, the Trustees now fear that the 1971 loss will reach cooperation of Labor. $240 million. They stated that the Railroad would assure reasonable protec• To surmount this crisis—to enable the railroad to survive— tion for employes affected by the changes. the Trustees have been pursuing an urgent four-point program: A notice of the intended changes was sent to the United Trans• portation Union, as required by Section 6 of the Railway Labor Reporters for newspapers/ radio and TV gathered to hear the Trustees discuss Penn Act. Central's survival program. Photo at top shows the four Trustees, who were appointed a The Trustees stated also that "in view of our desperate and year ago by the Federal Court: George P. Baker, former dean of the Harvard Business School; Willard Wirtz, former Secretary of Labor under Presidents Kennedy and unique circumstances, we shall ask the Federal Government to Johnson; Richard C. Bond, president of the board of trustees of the John Wanamaker take two steps: stores; and Jervis Langdon, Jr., former president of the B&O and the Rock Island. At 1. "To set aside the remaining excess crew laws which im• extreme right is the man they selected to run the railroad. President William H. Moore. pede bargaining and force us to operate five-man crews in Ohio and six-man crews in Indiana. 2. "To authorize the bankruptcy court to set up machinery for final adjudication of crew consist disputes, including the fireman manning issue, in any case under the Railway Labor Act that remains unresolved after 90 days. "If the obstacles and delays which frustrate meaningful bar• gaining can be eliminated, at least in the case of bankrupt rail• roads, we believe that the likelihood of a successful reorganiza• tion can be virtually assured." At the press conference, reporters asked questions covering a wide range of topics. Answers were given by individual Trustees and by President William H. Moore. Here were some of the topics: Q. "I would like to ask a question about the Congressional mood to aid Penn Central financially, particularly since the problems of Lockheed. Do you sense there has been any change Continued on Page 2 1 Continued from Page 1 in the general feeling?" Trustee Langdon: "We have accepted the merger as an accom• Trustee Willard Wirtz: "I think there has been a clear trend plished fact and have used that as a starting point to try to reor• in the public thinking that it has not liked the idea of public ganize the Railroad." funds being used for private corporations unless it is absolutely President Moore: "The merger has taken place and it's not for necessary. There has been a hardening of that position, as we the Trustees to determine whether or not it should have taken read it, over the past several months.'' place, but to determine what we can do about making it a success• ful merger." Q. "On the matter of collective bargaining, isn't it true that the unions aren't going to give up anything unless Congress Q. "But on paper, was it necessary?" forces them to give it up?" Trustee Langdon: "Well, these companies prior to the merger Trustee Wirtz: "I am not going to assume that. There must were really not good earners at all. Actually, their rates of return be a realization that our situation is more serious than it has ever were very low, and they proposed savings of some $80 million or been before, and we are going to go on the basis that the right $85 million as a result of coming together; and I suppose, looked at answer would be one which comes from collective bargaining." from that point of view, they might very well regard it as a nec• essary merger. It was certainly necessary, or thought to be neces• Q. "You have announced plans for sale of real estate in New sary, from the New Haven's point of view, because that railroad, as York. You have also announced plans to turn over all the stock you will recall, was in bankruptcy and its only chance of creating you hold in your subsidiary Pennsylvania Company to a group viability was to be included in the merger." of banks, in settlement of the $300 million debt you owe the banks. How much cash do you anticipate getting, after all the Q. "What reduction of employes have you had this year?" litigation and everything?" President Moore: "We have reduced employment this year by Trustee George P. Baker: "We don't know whether we will get 2630, mostly through attrition." any cash out of either of those—cash that we can use in the rough Q. "What is the financial situation in commuter service?" period of the next six months or the next year. With everything President Moore: "In the New Haven service, our deficit in we try to sell, practically without exception, there is opposition commuter operation is about $6 million a year. We get payments from the institutions holding Penn Central bonds and from the from MTA and CTA that make up for that deficit. trustee of the New Haven Railroad." "In the Hudson and Harlem service, we have a deficit of $13 1/2 Q. "What else has Penn Central got to sell?" million a year, and we are now negotiating an agreement with Trustee Jervis Langdon, Jr.: "The bulk is represented by what MTA for that service. has been, in effect, already offered for sale. There are some other "In Philadelphia we have a deficit of around $8 1/2 million a year properties; but most of them are encumbered and involved in and we get payments from SEPTA of about $5 1/2 million, leaving situations where, if sold, cash may not come through to the Rail• a deficit of $3 million. road. However, it may be possible to reach agreements with the "On the New Jersey service, we are not receiving any payments, mortgage bondholders in the case of the New York properties to and have a deficit of about $6 million. use the proceeds for equipment, on which they would then have "In the Boston area, the subsidy arrangements run out on their lien. This has been done in the past, and there is some reason August 1st, and there are conversations going on of what to do to believe that we may possibly be able to do it again.